Water (Special Measures) Bill [ Lords ] (Third sitting)

Tim Farron Excerpts

Committee stage
Tuesday 14th January 2025 Public Bill Committees

[Dr Neil Hudson (Epping Forest) (Con)]

It is a privilege to serve under your chairship today, Dr Huq. We have no formal objection to clause 7, which imposes a duty on environmental regulators to impose penalties for offences by water company that the clause specifies. Offences have of course increased, and water bosses have been banned from receiving bonuses if a company has committed serious criminal breaches. Regulators have more powers than they used to in being able to impose larger fines for polluters without needing to go to court. The clause focuses on exactly the same principle and we therefore have no formal objections.

I raised in an earlier Bill Committee sitting—this is relevant here—that there has been an increase in the number of inspections that water companies can expect, from 4,000 a year by April this year to 10,000 a year by April of next year. In other words, what has been addressed in the past is not just regulation, but the whole pathway of the enforcement of regulations, so that regulations are not merely blunt instruments but active ones that water companies can expect to have to deal with if they do not act responsibly to their customers, the environment and the wider public.

On that last point, will the Minister clarify and ensure that these offences are and will be enforced and commit to making further amendments to the law, not only regarding the offences themselves, but also on their enforcement, if the Government believe that things need to be tightened up moving forward? Aside from those clarifications, we have no formal objections to the clause.

[Tim Farron (Westmorland and Lonsdale) (LD)]

It is a great privilege to serve under your guidance this morning, Dr Huq. We also have no objection to the clause and, in fact, we consider automatic penalties to be a positive move.

My concern is that we see water companies not paying the fines that are levied against them. We talk about minor to moderate offences, but water companies wriggle out of paying fines for much larger offences, too. I just want to probe the extent to which the automatic penalties might stretch to what are considered more serious breaches.

I mentioned an example last week in Committee. In November 2021, Ofwat launched an inquiry into sewage discharges and how water companies manage their treatment centres and networks. It found three water companies in particular to be in breach: Thames, Northumbrian and Yorkshire. It imposed fines on those three companies—a £17 million fine against Northumbrian Water, a £47.15 million fine against Yorkshire Water and a £104.5 million fine against Thames Water—but as of autumn last year, not a single penny of that has been collected. It is understood that Ofwat allocated a grand total of eight and a half people to pursuing that particular line of inquiry.

Large fines, which there is no doubt that these companies rightly face, make no difference if they are never collected. That underpins the failure of our regulatory framework—water companies clearly feel they can just run rings around Ofwat and the other regulators. We very much welcome the automatic penalties, but we remain a bit concerned and would like the Minister to clarify whether those automatic penalties would have covered fines of that size as well. Otherwise, we are very supportive of the clause.

[Emma Hardy]

It is good to start the day off with a bit of unity in the Committee Room and everyone agreeing. In terms of which offences the automatic penalties will apply to, we are looking at targeting minor to moderate offending. The purpose behind the clause, and much of the Bill, is to change the culture of the water industry.

As I said in my opening remarks, one of the concerns about how the water industry operates at the moment is that the standard of proof needed to impose fines for minor to moderate offending is often seen as not being worth the cost. Companies are therefore getting away with minor to moderate offences because of the cost of trying to prosecute them. These penalties will apply to those offences. If the offence turns out to be more significant—not minor to moderate, but more of a major pollution incident—obviously, penalties will apply in the usual way.

For an offence to be suitable for an automatic penalty, we consider that the Environment Agency must be able to quickly identify and impose the penalty and the offence must cause no or limited environmental harm. I describe it to colleagues as similar to speeding ticket offences. Everybody knows that if they go over 30 mph in a 30 mph zone where there is a camera, they will get caught and fined. That is the idea behind the fixed penalty notice. If someone commits an offence that they are not meant to do, they are automatically fined.

The proposed offences will cover information requests. The details will be dealt with in secondary legislation, on which colleagues across the House will vote. My thinking on information requests is that a situation where someone has to comply with a request for information and is given a timeframe, but does not deal with it in the timeframe, is the kind of thing we are looking at for automatic fines. As for reporting offences, pollution offences and water resource offences, we will consult on where the penalties can be used, and Parliament will debate and vote on them before any changes are made.

The Regulatory Enforcement and Sanctions Act 2008 provides for the enforcement of penalties if a company refuses to pay a penalty. That includes allowing regulators to use the same enforcement mechanisms available to a court. The Act also allows for interest charges in the event of late payment. Parliament will debate and vote on the details in secondary legislation.

I thank all hon. Members for their invaluable contributions to the debate on clause 7. The clause will fundamentally drive improved compliance across the water sector through introducing automatic penalties for specific offences, allowing the regulators to impose penalties more quickly.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Abstraction and impounding: power to impose general conditions

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Emma Hardy]

I thank the hon. Gentleman for his comments. Modifying the licences individually is both expensive and time consuming, which is why we are hoping to modernise and harmonise the process under this clause. It is crucial that automatic penalties under clause 7 can be applied to abstraction and impounding offences, so this power is needed to improve the water industry’s regulatory framework. For that reason, I commend the clause to the Committee.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Requirement for Ofwat to have regard to climate change etc

[Tim Farron]

I beg to move amendment 27, in clause 9, page 14, line 11, leave out from duties to end of line 13.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Tim Farron]

Let me clarify what we mean with this amendment. Among the myriad problems in the water industry, perhaps the greatest is the failure of the regulatory systems. We are concerned, particularly in relation to the Climate Change Act 2008, that the obligations placed on water companies via the regulator are not sufficiently clear. Let us look at the wording of clause 9:

“In exercising or performing any such power or duty in accordance with those provisions, the Authority must also have regard to the need to contribute towards achieving compliance by the Secretary of State with the relevant environmental target duties”,

and we are happy with that, but then it states

“where the Authority considers that exercise or performance to be relevant to the making of such a contribution.”

Basically, we are giving Ofwat wriggle room to do nowt if it wants to. As we saw earlier on clause 7, Ofwat has a track record of not even imposing the colossal fines due from water companies, and I am not filled with confidence that if we give it wriggle room, it will not use it.

My concern is that the clause is building in a qualification, an opportunity for the regulator to step back and the possibility—dare I say, the probability—that measures against water companies will not be enforced. If we care about tackling climate change and about a stronger and robust regulatory framework—and we surely do—we should remove these words to remove the wriggle room and to make sure that regulation is fit for purpose.

--- Later in debate ---

[Emma Hardy]

As I am sure the hon. Member for Westmorland and Lonsdale will agree, the Government heard the strong support in the other place for adding a further environmental duty to Ofwat’s core duties to support the Government in making progress against our environmental targets. I pay tribute to Baroness Hayman for her work on this.

We understand that there are concerns around the current core environmental performance of the water industry and around the role and responsibilities of the water industry regulators. It is for this reason that the Government tabled an amendment in the other place that will require Ofwat to have regard to the need to contribute to achieving targets set under the Environment Act 2021 and Climate Change Act 2008 when carrying out its functions.

This amendment will further ensure that Ofwat’s work to contribute to the achievement of environmental targets complements the work of Government, who are ultimately responsible for the 2021 Act and the 2008 Act targets. It is important to note that the independent commission announced by the Government will take a full view of the roles and responsibilities of the water industry regulators. Any changes made now to Ofwat’s duties may therefore be superseded by the outcomes of the commission. I hope the Committee agrees that this power is needed to ensure that the environment is considered in regulatory decision making.

Amendment 27 seeks to remove Ofwat’s discretion to exercise its duty to have regard to environmental targets where it feels this as relevant. It will be for Ofwat as the independent regulator to determine how it applies the Government’s new obligation to its regulatory decision making, and how this new duty will not take precedence over other duties. It is for this reason that flexibility has been built into the drafting of this duty, ensuring that Ofwat has discretion to exercise the duty where it feels it is relevant.

Mechanically applying a duty in circumstances where it is not relevant to a particular matter would be a waste of resource. That discretion is in line with similar duties for other regulators. For example, the Financial Services and Markets Act 2000 was recently amended to provide an environmental duty for the financial regulators. It is right that as the independent regulator, Ofwat has the discretion to balance its duties and determine when it is appropriate that they are applied. The new duty introduced by the Government can be only a stopgap before more fundamental reforms are brought forward. For those reasons, we will not accept the amendment from the hon. Member for Westmorland and Lonsdale, and I hope he feels able to withdraw it.

[Tim Farron]

I am not reassured that removing this discretion means that a mechanical duty is placed upon Ofwat. I think that removing discretion is actually very important. It will only be applied where it is relevant by definition. I feel that by building in wriggle room, we are creating vagueness in the process. Nevertheless, we will not seek to push this amendment to a vote today. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 ordered to stand part of the Bill.

Clause 10

Charges in respect of Environment Agency and NRBW functions

Question proposed, That the clause stand part of the Bill.

[Emma Hardy]

Thank you, Dr Huq, for giving me the opportunity to speak on clause 10, which is one of my favourites. The costs for Environment Agency and Natural Resources Wales enforcement activities are paid by the taxpayer via grant in aid. The clause broadens existing charge-making powers, allowing the Environment Agency and Natural Resources Wales to recover costs for enforcement from water companies instead of taxpayers. Failure to introduce the clause would result in the burden of funding water industry enforcement continuing to fall on the taxpayer. It could also result in the regulators being unable to scale up their water industry enforcement activities due to wider budgetary pressures.

The Secretary of State, or the Welsh Minister in Wales, and HM Treasury are required to approve charging schemes in consultation with affected parties. Those safeguards ensure that environmental regulatory powers are proportionate and support sustained improvements in environmental performance in the water industry. I hope the Committee agrees that this power is essential for environmental regulators to become more self-sufficient and less reliant on the taxpayer. I commend the clause to the Committee.

--- Later in debate ---

[Dr Hudson]

Clause 11 extends the purposes for which water quality inspectors may be appointed to include functions relating to national security directions under section 208 of the Water Industry Act 1991, and it provides flexibility for the charging of fees for regulatory work. This is a straightforward clause to which we raise no formal objection, but once again we would be grateful for a couple of clarification points from the Minister. How will the Government increase the Drinking Water Inspectorate’s ability to monitor and audit water supplies? Does the Minister feel that the clause will improve the inspectorate’s functions? Will the Minister please explain how the Government intend to support the powers of the Drinking Water Inspectorate, beyond this clause? She praised the inspectorate, and I echo that praise, but how do the Government intend to support its capabilities?

Once again, we wish to raise no formal objections to the clause. I would be grateful for clarity on the points I have highlighted.

[Tim Farron]

We also have no objections to the clause, but I want to probe it a bit. The Minister rightly praised the Drinking Water Inspectorate. I think most of us would say that its performance as a regulator is significantly better than Ofwat’s, but one of the biggest problems that we face within regulation is the fragmented regulatory framework. We have the DWI, Ofwat, the Environment Agency and others too. What consideration has the Minister given to the efficacy of continuing that fragmentation?

The Minister may argue, in relation to the DWI, that if it ain’t broke, don’t fix it. I take that point, but regulation of the water industry is absolutely broke. It is very clear, particularly when it comes to the Environment Agency and Ofwat, that large water companies run rings around the regulators because of their heft, their weight, their capability and the volume of their staffing, which is larger than that of the regulators. The culture of the regulators is sometimes not aimed at pursuing those they are meant to regulate.

Although the DWI is broadly a successful regulator, do we not face the ongoing problem that having so many regulators gives water companies the ability to avoid their responsibilities? Will the Minister give that some further consideration?

--- Later in debate ---

[Dr Hudson]

On clauses 12 and 13, the Opposition tabled amendments 7 and 8 to remove them. They provide the Government with the power to issue special administration orders to water companies that face financial difficulties.

I put on record my thanks to my Conservative colleagues in the other place for sounding the alarm on this issue when the Bill came forward. They made the case that the measures in clauses 12 and 13 could put the very people we want to protect in such legislation, namely the consumers, at risk. The moral hazard has been explicitly set out by my colleagues in the other place, but I will attempt to summarise it so that we are clear what the problem is. As it stands, the clauses will give the Government the power to recover any losses they make through placing a company in special administration by raising consumer bills.

The problem seems self-evident. If water companies, through their own failure, require the Government to place them under special administration, why should consumers be expected to foot the bill for those failures when they had no particular responsibility for them? It runs contrary to the nature of all the action that has been taken in recent years to try to improve our water quality, and companies that have failed to get their affairs in order must take responsibility.

I was on the Environment, Food and Rural Affairs Committee in the last Parliament, and we spent a lot of time looking at the financial resilience and behaviour of the water sector in close detail. I know that the current iteration is continuing that work. It was concerning to hear about the financial resilience of the sector at first hand in our hearings and meetings. As I said in a sitting of this Committee last week, the financial resilience of the water industry is not a hypothetical issue, but one of paramount concern right now.

We are all starkly aware of concerns surrounding the financial resilience of companies such as Thames Water. We heard about that in detail on the Environment, Food and Rural Affairs Committee in the last Parliament. In November, Ofwat’s “Monitoring Financial Resilience” report identified 10 companies that needed an increased level of monitoring and/or engagement concerning financial resilience. Three were placed in the highest category of “action required”, which means that action must be taken or is being taken to strengthen a company’s financial resilience challenges and that there is a requirement to publish additional information and reporting on improvements at a more senior level with Ofwat.

As well as sending out the opposite message to the companies that Ofwat is working so hard to scrutinise and regulate to protect consumers, clauses 12 and 13 send out the wrong message to consumers themselves. Consumers were recently told that they can expect their average bills to rise by a minimum of about £86, at a time when no doubt some of them have concerns about how to afford their existing bills, along with wider cost concerns. I say gently to the Government that the recent Budget did not help the situation for people’s household budgets. How can it be fair that as a result of these clauses the Government may lead consumers to pay more at a time when many are finding it difficult to pay their bills and do not feel that they are getting the clean water that they deserve? It will potentially add insult to injury when many people are all too aware that they could face higher prices on their water bills because of the Government’s moves.

Shareholders and water company bosses used to be able to receive dividends and bonuses despite polluting our rivers and seas and failing to do the right thing to tackle it. Although reforms have been made to ensure that water company bosses who are not doing their duty with regard to our waterways are forbidden from claiming excessive bonuses, the sting will remain for many people when they keep in mind the prospect of paying higher bills to bail out companies for their poor financial performance.

To water companies, these clauses will send out a signal that they do not have to worry about incurring the consequences of financial irresponsibility, as the Government will have a mechanism to bail them out and consumers may indirectly have to fork out the costs. Nobody is being required to take accountability or face the consequences of the decisions that have caused the failure, but those who have no responsibility or influence are being forced to pay an unfair price increase.

Worse still, the clauses fail completely to specify how much they can require companies to raise from consumers or how much consumers could have to pay in increased costs as a result of the Government’s imposition of these conditions on water companies. That means that any announcements of price changes to water bills, such as those announced by Ofwat, could give no indication at all of how much consumers could end up paying on their water bills. To compound the higher prices even further, consumers may end up facing higher bills to solve special administration financial issues for companies by which they are not even served.

Under clause 12, proposed new section 12J(4) of the Water Industry Act states that “relevant financial assistance” in subsection (3) can include

“any other company which holds or held an appointment under this Chapter and whose area is or was wholly or mainly in England.”

Companies that do the right thing could be forced to pay up, or make their consumers pay up, for the mistakes of those who have failed to do the right thing. As my noble Friend Lord Remnant put it:

“It is the debt and equity investors”

in a company that has failed to do the right thing

“who should pay for these losses in the form of lower proceeds from any eventual sale. Why should a retired police officer in Yorkshire or a hard-working nurse in Cornwall lose out to a hedge fund owner in New York trying to make a quick return?”—[Official Report, House of Lords, 20 November 2024; Vol. 841, c. 293.]

Although in the other place the Government attempted to explain away concerns by suggesting that they do not think that they will have to use the power except as a last resort, and that the bar for special administration would be extremely high, the fact that on more than one occasion the Government could have accepted amendments to remove proposed new subsection (4) must mean that they expect that on at least some occasions they will require its use. The time taken to defend the measure and oppose reforms suggests that this is no mere formality in the wording of the Bill, but something that the Government may put in place.

The Minister in the other place said that the Government would seek to exercise the power in proposed new subsection (4) only if Government bail-outs to water companies could not be financed for the duration for which a company is in special administration—that is, during the shortfall. If that is the condition the Government are setting for the measure—if we have to have the measure at all—could they not have set it out explicitly within the Bill? At the very least, that would have provided clarity about how far the power should be permitted to go.

Clause 13 will provide the Welsh Government with the same powers as those in clause 12. Although the powers in clause 13 are independent of who occupies the offices of the Welsh Government, it should be noted that the Welsh Government who would currently be expected to exercise the powers do not have the most brilliant track record on the water industry, to say the least. Under the Welsh Labour Administration, the average number of spills from storm overflows in 2022 was two thirds higher than in England. That record suggests that the Government in Wales leave much to be desired when it comes to the competence of the water industry, and there is evidence for concern when it comes to exercising the clause’s powers.

Regardless of the specifics of the subsections and of who holds the powers contained in clauses 12 and 13, they are, as they stand, completely against the principles of improving the water industry. I urge the Minister to consider those points and to remove the clauses. Accordingly, we will seek a vote to remove clauses 12 and 13 from the Bill.

[Tim Farron]

I back my hon. Friend the Member for Witney, who has made an excellent case for our amendment to clauses 12 and 13. We are deeply concerned about the issue. There are two aspects to the public’s reaction to the scandal in our water industry. First, there is revulsion about sewage being dumped in our lakes, rivers, streams and coastal areas, which is obviously appalling. Secondly, there is a deep sense of injustice that people are making vast amounts of money while not providing basic services.

For a day or two last week, the coldest place in the country was Shap, in my constituency. I had the pleasure of being there over the weekend. All water was frozen. However, that is not always the case. Last year alone, at Shap pumping station, 1,000 hours’ worth of sewage was pumped into Docker beck. Just along the way at Askham waste water treatment works, 414 hours’ worth of sewage were dumped into the beautiful River Lowther just last year. I make that point because the water bill payers who have to deal with that know that of every £9 they spend on their water bills, £1 is going to serve United Utilities’ debt. That is at the low end of the scale: until the change announced just before Christmas, 46% from Thames Water’s bills was used to service debt.

Over the lifetime of our privatised system in this country, the water companies have collectively racked up £70 billion of debt. That means that all bill payers are paying between 11% and 46% of their bills simply to service those companies’ debt. Our amendment would simply tackle the fact that if investors choose to take risks, hoping to make gains, but fail, they should accept the consequences of those risks, which they chose to take, rather than passing on the cost to my constituents and everybody else’s. It is not for the public to carry the can for corporate failure.

[Emma Hardy]

I will speak to amendments 11 and 12, both of which were tabled by the hon. Member for Westmorland and Lonsdale. I welcome the opportunity to bust some myths and add some facts to the debate. Speaking of facts, following the debate that we had at our last sitting, we have produced a fact sheet relating to storm and other overflows, which has been circulated to all members of the Committee. I recognise that we are not discussing that now, but I thought I might mention that my promise to provide the evidence has been fulfilled. For this debate, perhaps it would be helpful to produce a fact sheet that explains exactly what this is and what it is not, because there has been an awful lot of confusion already.

On the subject of facts, I am not quite sure where the shadow Minister’s number on average bill increases of over £80 a year comes from. The fact is that the average bill increase is £31 a year.

--- Later in debate ---

[Emma Hardy]

To be clear, this is literally just a point of process. The provision, which is not currently available in law, says that in the event of an application to the court for a SAR, the Government will be notified at the same time. The reason, as I outlined in my opening remarks, is that we do not believe that creditors are likely to protect the public interest as comprehensively as the Government. It is a mere process clause that provides that in the event of an application to the court for special administration, the Government and Ofwat need to be informed at the same time. The Government maintain the importance of ensuring that the Government and Ofwat are notified in the event of a winding-up petition. For that reason, I urge that the clause stand part of the Bill.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15

Extent, commencement, transitional provision and short title

[Tim Farron]

I beg to move amendment 20, in clause 15, page 21, line 22, leave out subsections (2) to (8) and insert—

“(2) The provisions of this Act come into force on the day on which this Act is passed.”

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 5.

Clause stand part.

[Tim Farron]

We recognise and, indeed, strongly believe that patience is a virtue, but on these Benches we are also a bit impatient. Our concern regarding this clause is simply about implementation. There are two categories of things to be delivered. Some are to be done straightaway, and with others it looks like we are preparing to drag our heels. Therefore our amendment seeks to simplify implementation with one clear and immediate deadline for all provisions of the Bill.

Clause 15 provides that issues to do with remuneration and governance, pollution incident reduction plans, emergency overflows and nature-based solutions, for example, will come into force

“on such day as the Secretary of State may by regulations appoint”—

in other words, not right now. That troubles us, given that there is this great sense that there has been a lot of talk about reform of the water industry and we run the risk, at least when it comes to those provisions, of getting just more talk. Making things subject to consultation, further navel contemplation, does not feel like the way to radically reform our industry. Our single deadline would cut through all that and bring the urgent change that the water industry desperately needs, so we commend amendment 20 to the Committee.

[Dr Hudson]

I support Government amendment 5, as it is a privilege amendment in accordance with the procedure for the passage of Bills between the other place and this place. We wish to raise no formal objections to this and we have no opposition to the amendment.

[Emma Hardy]

I thank all hon. Members for their contributions. Amendment 20, tabled by the hon. Member for Westmorland and Lonsdale, seeks to make all provisions in the Bill come into force on the day it receives Royal Assent. I share his urge to get on with things, which is why I am a little confused by the desire elsewhere for another water review, but we will get to that when we get to it. First and foremost, I would like to reassure the hon. Member that the Government have carefully considered the appropriate method and timing for the commencement of each clause and have made provision accordingly in clause 15. A one-size-fits-all approach cannot be justified.

For example, the emergency overflows provision will be implemented over the course of two price review periods to protect bill payers from sudden cost increases. Therefore, the commencement provision for clause 3 has been designed to allow for a staged implementation where it is needed. The Government have already committed in clause 15 to the immediate commencement of the civil penalties provisions on Royal Assent. I assure the Committee that the Government and the water industry regulators are dedicated to ensuring that all measures in the Bill are commenced and implemented as soon as possible and appropriate, to drive rapid improvements in the performance and culture of the water industry.

The hon. Member for Westmorland and Lonsdale tempts me to read through a list of every provision and when they will be enacted, but I am going to save that treat for another time and instead list the clauses, rather than going through them in detail. The provisions in clauses 5 to 8, and in 10 to 15, will all come into force automatically either on Royal Assent or two months later. Clauses 1 to 4 and clause 9 will not commence immediately after Royal Assent and will require secondary legislation to come into force, which is due to the need for regulations required to commence the powers. I am sure that the hon. Member will have thoughts to share on those provisions involving statutory instruments after Royal Assent.

I trust that the hon. Member for Westmorland and Lonsdale is reassured by the Government’s careful consideration of the commencement of each clause, which has the best interests of bill payers in mind and recognises the need to debate and discuss some of the exact details under secondary legislation. I therefore ask the hon. Member to withdraw his amendment.

Government amendment 5 removes the privilege amendment made in the other place. I like this amendment, because one of the quirks of how British politics has evolved is that we have the amendment in the Bill—I found it quite amusing. The privilege amendment is a declaration from the other place that nothing in the Bill involves a charge on the people or on public funds. It is because the Bill started in the Lords that we have to have the amendment to remove that. It recognises the primacy of the Commons, and I think it is quite fun. It is standard process for that text to be removed from the Bill through an amendment at Committee Stage.

Clause 15 sets out the extent of the Bill, when and how its provisions are to be commenced and its short title. The Bill extends to England and Wales only. As set out in the clause, the provisions of the Bill will variously come into force on Royal Assent, two months following Royal Assent, or in accordance with regulations made by the Secretary of State or Welsh Ministers. The clause makes specific provisions, such as that the commencement of clause 3 may make reference to matters to be determined by the environmental regulators.

[Tim Farron]

I am happy to accept many of the assurances that the Minister gave, particularly on the role of Government amendment 5—I learn something new every day. The Liberal Democrats retain concerns about the delay in implementation of some of the good things in the Bill. All the same, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: 5, in clause 15, page 22, line 40, leave out subsection (11).—(Emma Hardy.)

This amendment reverses the “privilege amendment” made in the Lords.

Clause 15, as amended, ordered to stand part of the Bill.

New Clause 1

Special administration for breach of environmental and other obligations

“(1) Section 24 of the Water Industry Act 1991 (special administration orders made on special petitions) is amended as follows.

(2) After subsection (2)(a) insert—

“(aa) that there have been failures resulting in enforcement action from the Authority or the Environment Agency on three or more occasions to—

(i) maintain efficient and economical water supply,

(ii) improve mains for the flow of clean water,

(iii) provide sewerage systems that are effectually drained,

(iv) comply with the terms of its licence, or

(v) abide by anti-pollution duties in the Environmental Protection Act 1990, Water Resources Act 1991, or the Environmental Permitting (England and Wales) Regulations 2016 (SI 2016/1154);”

(3) After subsection (2) insert—

“(2A) In support of an application made by virtue of subsection (1)(a) in relation to subsection (2)(aa), the Secretary of State must compile and present to the High Court records of—

(a) water pipe leaks,

(b) sewage spilled into waterways, bathing waters, and private properties, and

(c) falling below international standards of effective water management.”—(Adrian Ramsay.)

This new clause aims to require the Secretary of State to place a water company into special administration arrangements if they breach certain environmental or other conditions.

Brought up, and read the First time.

[Adrian Ramsay (Waveney Valley) (Green)]

I beg to move, That the clause be read a Second time.

--- Later in debate ---

[Dr Hudson]

Good. We are all for talking about and raising the issue of chalk streams, but it is clear that we wanted to include that in our amendment. Our amendment will therefore be a chance to give chalk streams the attention they need from this Government. The previous Government were ready to deliver that and hand the baton over to the new Government, so that they could follow through on the explicit requirement that chalk streams be considered.

The amendment is a chance for the Government to reconsider their stance on the water restoration fund. I would be grateful for clarity from the Minister about what they are planning to do. If they are serious about improving our waterways and if the money from penalised water companies is allowed to go back into the local area to improve those waterways, we could agree about that. If the Government do not face up to this, that might be a negation of the various promises they made to the electorate when in opposition and send a message that their words are merely soundbites. I hope that the Minister will consider the points I have made and support this amendment to restore the water restoration fund—for the sake of not only our waters, but the democratic and local accountability on which they rely. We will seek to push new clause 2 to a vote.

[Tim Farron]

I rise briefly to support the new clause. Among many other reasons, it bears great similarity to one proposed by my noble Friend Baroness Bakewell. We consider everything in it to be right. As the hon. Member for Epping Forest has said, we should be deeply concerned about the Treasury seeking to hang on to money that, if there is any justice, ought to be invested back into the waterways that have been polluted by those who have been fined for that very offence.

I talked earlier about the deep sense of injustice felt across the country about those who pollute, who are getting away with polluting and who even—far from being found guilty—are getting benefits from that pollution. The measure would simply codify a move towards the establishment of a water restoration fund, supported, at least in part, by the fines gathered from those guilty in the first place. There would be a great sense of justice being done for folks concerned about how Windermere is cleaned up, how we make sure that Coniston’s bathing water standards remain high and how we deal with some of the issues I mentioned earlier on the River Lowther, River Eden and River Kent.

The water restoration fund should in part be supported by funds gained from those who are guilty: that is basic justice. We strongly support the new clause and will be voting for it if it is put to a vote.

[Emma Hardy]

I thank the hon. Member for Epping Forest for tabling new clause 2, which seeks to establish a water restoration fund in legislation. I accept his invitation to do better than the previous Government when it comes to pollution in the waterways, and welcome the low bar that they have set me.

A water restoration fund is already being established to direct water company fines into water environment improvement projects. This arrangement does not require legislation, because it exists. Defining a water restoration fund in legislation would create an inflexible and rigid funding mechanism, with the amendment requiring specific detail on the scope, operation and management of fines and money. We need to maintain flexibility in how water company fines are spent, to ensure that Government spending is delivering value for money.

The hon. Member can already see from the Bill and the discussions we have had that the cost recovery powers that we have introduced for the Environment Agency are an example of how we can ensure that water companies pay for enforcement. It is continuing to work with His Majesty’s Treasury regarding continued reinvestment of water company fines and penalties, and water environment improvement. A final decision on that will be made when the spending review concludes later this year. On that basis, I ask the hon. Member to withdraw his amendment.